Soft-Drink Industry in Europe and the US - Coca-Cola and Pepsi - Essay Example

Introduction To Management Ans Part-A: The PEST analysis is a useful tool for any industry or business in understanding the market behavior. The PEST analysis comprises an analysis of Political factors Economic factors Socio-cultural factors Technological factors All these factors have different relevance for different types of industries and businesses. These headings are a framework for reviewing a situation, and can also, like SWOT analysis, and Porter's Five Forces model, be used to review a strategy, position or direction of a company. A PEST analysis in general measures a market while a SWOT analysis measures a business unit, a proposition or an idea. This type of an analysis determines the market positioning and direction for the business. For the purpose of our study let us take analyze the soft-drink industry in Europe and US. As of now this market is mainly dominated by two players, Coca-Cola and Pepsi. The rising popularity of soft drinks has contributed immensely towards the growth and prosperity of Europe and America. Today the soft-drink industry employs more than 110,000 Americans with a payroll of more than $5 billion payroll dollars. Historically Coca-Cola has dominated the industry. Until 1950 Pepsi raised hardly a flicker of recognition. But now Pepsi has become a force to reckon with. Let us underline the present circumstances; Political Factors: During the Second World War Pepsi and Coke both enjoyed increased sales as they followed the flag around the world. However, after the war ended, and incomes improved, Pepsi's sales figures started decreasing. Things improved for Pepsi mainly when after Mr. Alfred N. Steele took over the Presidency. Mr. Steele could bring in this turnaround mainly in two phases. The first phase lasted from 1950 to 1955. In this phase all out efforts were made to overcome the shortcomings of Pepsi. During the second phase, lasting from 1955 to 1960 Pepsi started direct offensive against Coca-Cola. That was the time when Coca-Cola started accepting the formidable presence of Pepsi and responding to its overtures as well. The present political conditions in US and Europe are more or less stable, with the respective governments not taking sides. Both Pepsi and coca-cola have been contributing in good measure towards the political campaigns of diverse political parties and the governments. One factor which has certainly come to the advantage of coca-cola is the FIFA world cup 2006 in Germany, a formidable part of European market. Euro is now the currency of twelve European Union countries, stretching from the Mediterranean to the Arctic Circle (namely Belgium, Germany, Greece, Spain, France, Ireland, Italy, Luxembourg, the Netherlands, Austria, Portugal and Finland). Euro came into existence on 1st January 1999 when eleven (later twelve) EU countries established the conversion rates between their respective national currencies and Euro with formal circulation of bank notes and coins from 1st January 2002. Coca-Cola being the official partner of World cup soccer under these changed circumstances, not only brought it closer to the respective establishment, but having a borderless big area where people could move freely to see the football matches the frenzy generated has indeed helped coca-cola by leaps and bounds. Pepsi too appear to have recognized the trend and is focusing mainly on the markets of developing countries for now. Economic Factors: While analyzing the markets the economic factors that need to be taken care of are; Current and project economic growth, inflation and interest rates Labor supply, labor costs and unemployment Levels of disposable income and income distribution Stage of business cycle Impact of globalization Marketers need to consider the state of a trading economy in the short and long-terms. This is especially true when planning for international marketing. The soft drink industry is more than liquid refreshment and jobs and dollars. It is an industry that strongly believes in preserving the ideals and principles that helped it prosper from the early days to the present. As of now economy is going through a recessionary phase all around the globe. With the trend of outsourcing of many IT and software development jobs to countries outside Europe and US, both these regions have started showing signs of apprehension and increasing levels of unemployment. European labor markets are commonly described as rigid and labor mobility even within the European Monetary Union (EMU) member nations as limited. This gives rise to speculations of further increase in unemployment figures. Some economists have in general expressed their skepticism about a European Monetary Union. Economists have pointed to a large number of pitfalls on the road to a common European currency. All this discussion about the future of Euro will off course apply to the entire market as such, but the soft drink market happens to be more dominated by the youth, and they need spare money to spend regularly on the drinks. Similarly the drinks market in US is dominated by youth. Youth Population in US tops 40 Million with more than 8 million working full time. Youth employment is affected in US mainly by the seasonal trends and the outsourcing phenomenon, with Unions agitations becoming more and more vocal against this trend. The youth in general is less driven by bargains and more by attitude. But the overall trend in general is not that dim with Euro firmly on way to become stable currency after the initial hiccups. It is worthwhile here to mention that there were demands from Italy that the Euro be scrapped as a common currency as it was believed to be the reason of increase in price of goods and commodities in Italian market. But now those voices have considerably gone quiet and Euro is establishing itself quite well. With EMU and ECB coming in place the European market also becomes less hassling for soft drink makers, as the across the border movement is easier and the currency conversion requirements gone. Socio-Cultural Factors: The social and cultural influences on market and business vary from region to region and from country to country. For a common market like the EMU region will have different aspects of social and cultural values. Such factors include; Factors like health, education, public opinion, social attitudes, social taboos of the population in general including the growth rate and age profile of the society at large. The attitude of Press and Media towards a product or business policy of a company. This also affects the public opinion, and social attitudes. Lifestyle choices and related socio cultural changes. Changes in population demographics also have many potential consequences for organizations. As the total population changes, the demand for products and services also changes. The dominant religion in and around the region of target market The gender issues, ratios of male and female within the society. To what extent does language impact upon the diffusion of products onto markets Soft drink companies are a network of people working amidst the local societies and investing in local economies. It is therefore very important that the companies and products have a positive and related brand image amongst the masses. Prior to 1950 Pepsi was having a poor image, taste, packaging and quality control. Even after World War-II, which saw a spurt in its demand, Pepsi had to raise its prices to cover increased costs which made it less of a bargain than before. Things looked up after Alfred N. Steele took over. During its upward journey, Pepsi paid a lot of attention towards the quality stuff in early 50's and instead of distributing its energy on the entire market, concentrated mainly on a particular segment of the market (the principle of the mass). The results are here for all to see now, with Pepsi giving good competition to Coca-cola. The decline in the birthrate and improvement in health care have contributed to an increase in the average age of the population in the United States and the European region. Therefore many firms that traditionally marketed their products toward youth are developing product lines that appeal to an older market. Soft drink makers are no exception either. Traditionally older people prefer coffee or tea, keeping in minds some health problems, diet factors etc. But now soft drink companies have come out with energy drinks, diet coke/ diet Pepsi and drinks like Minute Maid Juices and Sodas. Similarly products like Lipton Brisk and Lipton Iced Tea are also an attempt to rope in the older age segment. Rising educational levels also have an impact on organizations. Higher educational levels allow people to earn higher incomes than would have been possible otherwise. The role of media has become very crucial today. With the onset of satellite TV channels, DTH and sky radios the electronic media has become very powerful. For this very reason now we see increasingly innovative commercials on national television. Technology: Technology is in fact a factor which not only affects the market but the entire process chain of any product, right from conducting feasibility studies to manufacturing, bottling, quality control, feedback and analyzing the data. With the onset of Internet communication costs are reduced to a great extent and increased emphasis is being given to remote working or automated working. Research and Development activities too have taken a turn for the better, with regular inputs from market being analyzed and acted upon in R&D labs. For this very reason today we see a range of products from Coca-Cola (like Coca-Cola, Coca-Cola Classic, Diet Coke, Cherry Coke, TAB, TAB Clear, Sprite, Sprite Remix, Fanta, Fresca, Frutopia, Mr. PiBB, Mello Yello, Barq's Root Beer, Barq's Floatz, Minute Maid Juices and Sodas, Powerade, Surge, Delaware Punch, and many more). Similarly Pepsi-cola also produces Pepsi (and Diet), Pepsi Vanilla (and Diet), Pepsi Twist(and Diet), Wild Cherry Pepsi-Cola (and Diet), Pepsi One, Pepsi Blue, Pepsi Edge, Mountain Dew Code Red (and Diet), Mountain Dew Live Wire, Lipton Brisk, Lipton Iced Tea, Lipton Lemonade, FruitWorks etc. With increase in R&D activities more emphasis is being given towards the health and related issues. Recently when news reports came in about the hazards of benzene content in cold drinks, soft drinks industry has promised to tackle benzene in drinks. Benzene is listed by health authorities as a known carcinogen. The soft drink industry itself has crossed many milestones in this journey so far. Today we work with 'talking' vending machines. Today we are in the IT age and marketing tools have undergone a sea change in these years. Now the cola wars has entered into cyberspace as well. Pepsi recently launched Globe Smart Client, powered by Yahoo, a downloadable service on mobile handsets as "Pepsi Globe'', which provides access to the company's online portal. Similarly Coca Cola launches Sprite-itude' experience zone, an interactive Web zone focused around the attitude of Sprite drinkers', where consumers can make their own Sprite-itude mobile movie' and play games online. These are all attempts towards brand building and being in regular touch with the customers. Both cola majors have also set up their own web zones on the internet. Part B: Business Performance of a company is a collaborative effort of the workforce, management and couple of external factors. Effective workplace learning leads to a more flexible, highly skilled workforce and the capacity to be more competitive. Changes in the workplace have affected the mix of technical and generic skills that employers now seek. Accordingly, education and training is increasingly being viewed as a broad system involving workplaces, educational institutions, individuals and a variety of other organizations including suppliers, professional societies, and community and interest groups A Demand-Driven Workforce Management can also help in gaining competitive advantage. Demand-Driven Workforce Management embodies a proactive mentality, where demand for product and services drives the workforce planning process. With this approach, revenue opportunities can be maximized by anticipating and preparing for surges in business volume. Demand-Driven Workforce Management takes all of the fundamentals of traditional workforce management - such as the automation of manual HR, timekeeping, scheduling, and payroll processes - and elevates it by empowering managers to be proactive, strategic, and resourceful. Answer 2: Management, it is said, is an art struggling to become a science. But there are others who contend that the formal study of management began as a science but has been contaminated by too many factors from various disciplines, thus making it at best a soft science. In fact, if science teaches one to know, art teaches one to do. Managers are supposed to know and do things efficiently and effectively to be successful. Management is required even where things go illogical or unscientific. Human Resource Management is a very crucial and an integral part of any organization. The very fact that now people are being considered as resource instead of liability marks the importance of human beings constituting this resource. Core areas of HRM include the individual, the organization and the social context of work and how all of these factors shape relations at work and result in organizational performance. Three core factors that determine the competence of any organization are; Resources: This includes ingredients like people, products, equipment, technology, information, cash, brand, distribution etc. Process: It involves, Hiring and training of the workforce, product development, manufacturing, planning and budgeting, market research, resource allocation etc. Values: The criteria by which decisions are made comprises of Ethics, cost structure and size of opportunity. A management philosophy can be viewed as a composite of the attitudes, beliefs, and concepts of the individual or a group about management. A manager is required to think, make decisions and take actions. As a result the manager builds a pattern of judgments, measures and tests. A number of management theories and philosophies have been enlisted by many management gurus. Today these theories are seldom used explicitly, largely because the insights they provided have influenced and been incorporated by further generations of management theorists and practitioners. Historically, management theories have been categorized as; Scientific Management Theory: At the turn of the century, the most notable organizations were large and industrialized. Often they included ongoing, routine tasks that manufactured a variety of products. Management tended to be a scientific and technical tool. Frederick Taylor developed the "scientific management theory" which espoused this careful specification and measurement of all organizational tasks. Tasks were standardized as much as possible. Workers were rewarded and punished. This approach appeared to work well for organizations with assembly lines and other mechanistic, routine activities. Bureaucratic Management Theory: After mid 1930's this theory embellished the scientific management theory. This theory focused on dividing organizations into hierarchies, establishing strong lines of authority and control. It was suggested that organizations develop comprehensive and detailed standard operating procedures for all routine tasks. Human Relations Movement: Today we are in the midst of the philosophy where customer is considered as king and the employee as a resource. As a result of Unions and government regulations more attention is being given to individuals and their unique capabilities in the organization. A major belief included that the organization would prosper if its workers prospered as well. Human Resource departments were added to organizations. The behavioral sciences played a strong role in helping to understand the needs of workers and how the needs of the organization and its workers could be better aligned. Now some more theories have come up for HRM as well (like the theory "X", "Y" and "Z" etc). Therefore we are now living in the era of when HR dictates the management theory principles. Taking into consideration the changes in the contemporary times, many more theories have cropped up In this cut-throat competitive era led by consumerism the theories can be broadly classified as; Contingency Theory: This theory asserts that when managers make a decision, they must take into account all aspects of the current situation and act on those aspects that are key to the situation at hand. With changes taking place rapidly in the society, this approach takes into account the changes to gain an advantage over the competitors. Systems Theory: A system is a collection of part unified to accomplish an overall goal. If one part of the system is removed, the nature of the system is changed as well A system can be looked at as having inputs, processes, outputs, feedback and outcomes. Similarly an organization takes inputs in the form of resources such as raw materials, money, technologies and people. These inputs go through a process where they're planned, organized, motivated and controlled, ultimately to meet the organization's goals. Outputs would be products or services to a market. The outcomes would also include enhanced quality of life or productivity for customers/clients, productivity. Feedback would be information from human resources carrying out the process, customers/clients using the products. Chaos Theory : This new theory contends that events are rarely controlled and refer to the biological systems in explanation. This theory suggests that systems naturally go to more complexity, and as they do so, these systems become more volatile (or susceptible to cataclysmic events) and must expend more energy to maintain that complexity. As they expend more energy, they seek more structure to maintain stability. This trend continues until the system splits, combines with another complex system or falls apart entirely. This trend is what many see as the trend in life, in organizations and the world in general. If I were to opt for an organization based on the theory it adopts I'd definitely go for a company which firmly believes that Employees are a very crucial resource for the success of the organization. Human being love to be cajoled into working and not being commanded always. Such command system can work effectively with an Army contingent but not for a company which seeks to optimize the capability of its workforce in minimum possible time and expects quicker results from its R&D labs in order to beat the competitor. The HRM mainly intends to bring optimum out of the individual so that the company gets maximum output and in turn the individual too gets his due share of profit. One of the prime objectives of HRM is to develop congruence between individual goals and organizational objectives while striving for realizing higher standards of performance, satisfaction and quality of working life. The HR manager is therefore directly responsible towards 'human assets' in an organization. For any organization to function effectively; three main aspects are critical; Eliciting the contribution from all concerned Organizing the workforce by assigning them the responsibilities, and Developing an information system for monitoring and coordination activities. Only a theory based on Human relations can fully coordinate these aspects because it provides flexibility to the manager, while the other theories of management are rigid in their approach. HRM is a part of strategy for the organization and no rigidity in strategy can work when the world is changing so fast.. Resources: 1. George R Terry, 'Principles of Management', Richard D Irwin, USA, 1994 2. American Beverage Association,.http://www.ameribev.org/ 3. PEST analysis, http://www.marketingteacher.com/Lessons/lesson_PEST.htm 4. PEST Analysis, Understanding "Big Picture" Forces of Change, http://www.mindtools.com/pages/article/newTMC_09.htm 5. Philp Kotler, 'Marketing Management', Prentice-Hall Inc.USA 6. Free Management Library, http://www.managementhelp.org/ Read More